Assume company Banana, with a market value of $ 2 0 0 , 0 0 0 ,
Fantastic news! We've Found the answer you've been seeking!
Question:
Assume company Banana, with a market value of $ wants to buy company
Grape, with a market value of $ Banana has two scenarios for the synergy gains
i an optimistic one, with $ per year in perpetuity and ii a pessimistic one, with
$ per year in perpetuity. The discount rate is
a Before and without doing any calculations, discuss and explain in detail what are
the pros and cons of bidding with stock and bidding with cash in optimistic and
pessimistic scenarios.
marks
b Assume a cash bid offer X What are the minimum and maximum X in both
scenarios, that are consistent with the merger going through? Assume there is no
information asymmetry.
marks
c Assume a stock bid offer. Banana offers Grapes shareholders an s stake in
the merged company. What are the minimum and maximum values of s in both
scenarios, that are consistent with the merger going through? Assume that Grape
shareholders believe in the scenario proposed by Banana, ie there is no
information asymmetry.
Related Book For
Introduction To Derivatives And Risk Management
ISBN: 9781305104969
10th Edition
Authors: Don M. Chance, Robert Brooks
Posted Date: